Northern Rock reports improving performance

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Northern Rock has reported that it is making good progress and is on course to reach its 2009 mortgage lending target.

The nationalised bank's third quarter trading statement reported that its gross mortgage lending increased to £1 billion in the third quarter, taking its total lending in 2009 to £2.3 billion.

The quality of new lending remains high, said the Rock, with the average loan to value of 55 per cent on new mortgages. "All mortgage lending will continue to be responsible, with affordability for customers remaining a key consideration," it said.

The bank said it intends to further increase its gross mortgage lending towards £9 billion in 2010. However, the percentage of Northern Rock's residential mortgage customers who were more than three months in arrears rose to 4.11 per cent by the end of the third quarter, up from 3.92 per cent three months earlier.

In its announcement, the bank said: "Conditions in the mortgage and housing markets remain subdued. House prices have moderated in recent months, but the Company remains cautious as to the medium term outlook, given levels of unemployment and weakness in the wider economy."

It went on to confirm that it would remain loss making for the full year.

"I am encouraged by the improving financial performance of the company. Today's results demonstrate that we are continuing to make good progress," commented chief executive officer, Gary Hoffman.

"At Northern Rock we remain committed to working with all our customers and to assist those who may be facing financial difficulty. We continue to invest a lot of effort in our approach to debt management and to providing the best possible support we can in all circumstances."

The results come off the back of the European Commission's approval for Northern Rock to be split into two banks.

Northern Rock plc will be a new savings and mortgage bank that will hold and service all customer savings accounts and some existing mortgage accounts, as well as carrying out new lending.

The second bank, Northern Rock (Asset Management) plc will oversee the rest of the mortgages and will be charged with repaying the government loan, which currently stands at £14.5 billion.

The split is expected to be completed by the end of the year and Northern Rock has assured customers that it is business as usual.